As part of a sweeping tax overhaul bill, House Republicans on Thursday proposed eliminating billions of dollars in corporate tax credits that have played a key role in the booming industry to develop drugs for rare diseases.
For more than three decades, pharmaceutical companies have claimed a 50 percent tax credit for the cost of clinical trials of orphan drugs, medicines intended to treat diseases affecting fewer than 200,000 people.
Sales of orphan drugs hit $36.1 billion last year, according to a report released last month by QuintilesIMS and the National Organization for Rare Disorders. And, according to EvaluatePharma's 2017 Orphan Drug Report, orphan drugs will account for nearly 22 percent of global prescription sales, excluding generics, by 2022
Companies whose drugs are deemed orphans by the Food and Drug Administration get a package of financial incentives, including tax credits and seven years of market exclusivity.
The credits were approved as part of the 1983 Orphan Drug Act, which has been under scrutiny in the past year as the country grapples with skyrocketing drug prices. Orphan drugs routinely carry five-digit price tags and have become a lucrative market for pharmaceutical companies.
In 2018, the U.S. is expected to grant nearly $2.8 billion in orphan drug tax credits to companies, according to estimates from the Treasury Department. And the reduced tax revenue for the U.S. government under the current law would increase every year, to a projected total of $75 billion from 2018 to 2027.
As sales rise, so does the cost of the orphan drug tax credits to the U.S. government. "A billion here and a billion there and eventually it's real money," said Nicholas Bagley, a law professor at the University of Michigan who has studied the credits.
The National Organization for Rare Disorders said in a statement that there would be 33 percent fewer orphan drugs coming to market if the tax credit vanishes, calling it "an unprecedented decrease in the development of these life-improving therapies." NORD said advocates for people with rare diseases had sent over 500 letters to Congress in support of the credit.
The Biotechnology Innovation Organization, a trade group, and 20 individual drug companies, including Novo Nordisk, Horizon and Sanofi, wrote to Congress late last month urging legislators to keep the credit in the tax overhaul bill. BIO vowed Thursday to work with lawmakers to save the credit.
Yet James Love of the think tank Knowledge Ecology International welcomed the potential repeal as a way to begin a conversation about "deeper reform" in the financial incentives for rare diseases. He said that cancer drugs and "huge blockbuster drugs [have] qualified for orphan tax credit[s] ... and certainly provided no relief from high prices."